No matter if you are rich today or flat broke, if you are wanting to grow your real estate portfolio eventually you’ll run out of your own money. Until money literally grows on trees, your purchasing ceiling is limited by either cash, leverage, or debt.
So what should you do? Our answer and suggestion is this: learn how to utilize “OPM” (Other People’s Money) or other people’s resources!
There are a lot of people that want to want to invest in real estate but do not have the expertise to do so themselves. They don’t have your expertise!
This is when a Joint Venture (JV) can be extremely useful! Now there are many ways to form a JV, and yes, they are different than a partnership or corporation. A common format is that of a “Money Partner” and a “Time Partner”. Both parties have resources that work well together. On the Time Partner side, they have the time to find good deals, qualify them, manage them, and be hands on for renovations or handling tenants. And for the Money Partner, this party can get into a high return real estate investment without doing any of the work. Sounds good to me right! Another easy one is this, a self-employed person makes tons of money each year but the bank wont give them a loan. Solution? Partner with someone who can qualify for the mortgage and give them a fair cut (for you to negotiate).
We have been able to use this strategy to build a lot of our portfolio, which includes buy-and-hold homes, small and medium size multi-family income properties, and development projects. Finding the right joint venture isn’t not easy, but nothing in life worth having comes easy – Theodore Roosevelt. (more below)
The basics
A joint venture is a business arrangement in which two or more parties agree to combine their resources in order to accomplish a specific task.
Common resources are be money, time, connections, and qualifying power, but anything else you can think of can work too.
Pros and Cons
Pros:
- Access to capital
- Limitless growth
- Scalability
- Free up your time (passive investor)
- Diversified risk
- Opens opportunities to larger deals
- Two heads are better than one
- Shared workload
Cons:
- You have to share profits and/or equity
- Too many chefs in the kitchen
- Legal fees to set up agreement
- You have to give up control
What should you include in a joint venture agreement?
- The purpose of JV
- Who is the Purchase of property
- Term (length of contract)
- Roles and responsibilities
- Revenue / Equity Split
- Termination
- Death clause
- Exit strategies
If you want to learn more about joint venture partnerships and agreements, or want to scale up your real estate investing, contact us or check out our 4 Week Accelerator Program – Your direct route to building an investment empire for your retirement. visit: www.4weekprogram.ca
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Best wishes for your real estate investing endeavours! Thank you, The REINVESTORS